U.S. stocks continued to trade in record-high territory, staging another solid advance as yesterday's comments from President Trump regarding his soon-to-be-announced tax plan continued to fuel gains. Crude oil extended its recent rally, the U.S. dollar increased, Treasuries were lower and gold ticked slightly higher. In economic news, consumer sentiment dropped from a 13-year high and short-term inflation expectations rose.
The Dow Jones Industrial Average (DJIA) advanced 97 points (0.5%) to 20,269, the S&P 500 Index gained 8 points (0.4%) to 2,316, and the Nasdaq Composite added 19 points (0.3%) to 5,734. In moderate volume, 789 million shares were traded on the NYSE and 1.9 billion shares changed hands on the NASDAQ. WTI crude oil increased $0.86 to $53.86 per barrel and wholesale gasoline rose $0.02 to $1.59 per gallon. Elsewhere, the Bloomberg gold spot price ticked $3.14 higher to $1,233.51 per ounce, and the dollar index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 100.76. Markets were higher for the week, as the DJIA increased 1.0%, the S&P 500 Index advanced 0.8% and the NASDAQ Composite gained 1.2%.
Activision Blizzard Inc. (NASDAQ:ATVI $47) announced 4Q earnings-per-share (EPS) ex-items of $0.92 per share, well above the expected $0.73, with revenues growing 15.8% year-over-year (y/y) to $2.5 billion, compared to the anticipated $2.4 billion. Separately, the gaming company announced a new share repurchase program of up to $1.0 billion and a 15% increase of its dividend to $0.30 per share. Shares surged.
NVIDIA Corp. (NASDAQ:NVDA $114) posted 4Q EPS of $0.99, above the $0.83 FactSet estimate, as revenues jumped 55.0% y/y to $2.2 billion, versus the projected $2.1 billion. The chipmaker issued 1Q revenue guidance with a midpoint that was slightly above forecasts. Shares gave up an early gain and traded lower as the Street scrutinized its quarterly performance and guidance after 3Q's blowout results that took the stock on a more than 70% rally.
Expedia Inc. (NASDAQ:EXPE $123) reported adjusted 4Q EPS of $1.17, below the forecasted $1.36, with revenues rising 23.0% y/y to $2.1 billion, roughly in line with expectations. Gross bookings increased 8.0% y/y. Shares finished lower.
Sears Holdings Cor (NASDAQ:SHLD $7) jumped over 25% after unveiling its next phase of its restructuring plan, projected to deliver at least $1.0 billion in annualized cost savings in 2017 from the previously announced closure of 108 Kmart and 42 Sears stores, and reduce debt. The company also announced preliminary 4Q guidance that was above forecasts.
Consumer sentiment falls from 13-year high, import prices top forecasts
The preliminary University of Michigan Consumer Sentiment Index declined this month to 95.7, from the prior month's 98.5 level—which was the highest since January 2004—and compared to expectations of a dip to 98.0. The current economic conditions component held steady m/m, while the outlook portion deteriorated. The 1-year inflation estimate rose from 2.6% to 2.8%, and 5-10 year inflation outlook dipped to 2.5% from 2.6%.
The Import Price Index increased 0.4% month-over-month (m/m) for January, compared to the Bloomberg projection of a 0.3% increase and December's upwardly revised 0.5% gain. Compared to last year, prices were higher by 3.7%, north of forecasts calling for a 3.4% jump, and following December's upwardly revised 2.0% increase.
Treasuries were lower, with the yields on the 2-year and 10-year notes along with the 30-year bond, ticking 1 basis point higher to 1.19%, 2.41% and 3.01%, respectively.
The stock markets are back in record territory, while the U.S. dollar and Treasury yields ticked higher, bolstered by U.S. President Donald Trump saying yesterday that "something phenomenal" will likely be announced regarding his tax plan in 2-3 weeks. This is overshadowing the recent flare-up in concerns about global trade relations and immigration on the heels of Trump's actions and comments. Also, last week's relatively dovish takeaway of the Fed's unchanged monetary policy decision and continued upbeat economic data have aided the markets. Crude oil prices are extending a rally to lend further support, in the wake of a report that suggested OPEC had achieved initial compliance of 90% with their recent production cut agreement.
Europe mixed, Asia mostly higher
European equities finished mixed, with lingering political uncertainty ahead of some key elections in the region being met with renewed optimism regarding U.S. President Donald Trump's promise of a "phenomenal" tax plan in the coming weeks. Also, the markets digested a stronger-than-expected read on China's trade activity and crude oil's continued rally on reports of OPEC's compliance with its production cuts that boosted the energy sector.
In economic news, French industrial and manufacturing production reports both missed estimates, while the UK trade deficit narrowed more than expected and the nation's manufacturing and industrial production both easily bested forecasts. The euro dipped and the British pound was little changed versus the U.S. dollar, while bond yields in the region finished mostly higher.
Stocks in Asia finished higher following the gains seen in the U.S. and European markets yesterday, bolstered by the continued rebound in crude oil prices and as U.S. President Donald Trump made a promise to expect his tax plan soon. The renewed U.S. tax optimism overshadowed heightened global trade and immigration concerns. Also, China reported a favorable read on its trade activity, headlined by stronger-than-expected January export growth. Japanese equities rallied with the yen giving back a jump as of late amid a strong advance in the U.S. dollar, while traders awaited today's meeting between Prime Minister Abe and U.S. President Donald Trump. Mainland Chinese shares advanced and those traded in Hong Kong also rose, while Australian securities gained ground and South Korean stocks traded higher. Indian equities finished flat.
Stocks ride late-week rally back to record highs
Conviction remained contained to begin the week amid exacerbated global market uneasiness toward the political risks in the U.S. and Europe, with the former exacerbating trade and immigration concerns and the latter facing key elections. However, the major U.S. equity markets staged a late-week rally into positive territory and back to record highs as reflation optimism resurfaced as President Trump pledged that a "phenomenal" tax plan was in the offing. The U.S. dollar index posted the first weekly gain of 2017 and Treasury yields pared early losses. Crude oil prices battled back to near the flatline as reports of OPEC production cut compliance countered oversupply concerns in the wake of a couple bearish oil inventory reports. Gold extended its recent jump in choppy trading.
The economic calendar was relatively light, though earnings season continued to roll on and continued to paint a relatively positive picture against elevated expectations. Hasbro Inc. (NASDAQ:HAS $98) and Activision Blizzard were standout winners, while Michael Kors Holdings Limited (NYSE:KORS $38) and Twitter Inc. (NYSE:TWTR $16) were hammered by their guidance. Per Bloomberg, with earnings season past the apex, of the 357 companies in the S&P 500 Index that have reported, about 51% have topped sales estimates and approximately 75% have exceeded earnings forecasts, with technology issues leading the way.
Next week, the domestic economic front will heat back up, with the Producer Price Index (PPI), Consumer Price Index (CPI), retail sales, industrial production, the Leading Index and housing starts and building permits, providing a good read on many key contributors to economic output. Also, the NFIB Small Business Optimism Index and regional manufacturing reports out of New York and Philadelphia are poised to also garner attention, along with festering political uncertainty on both sides of the Atlantic and the continued dissemination of earnings reports. Finally, Federal Reserve Chairwoman Janet Yellen will deliver her semi-annual testimony before Congress.
Investor caution is rising, which contrarily should help the bull market continue. Economic data has continued to beat expectations, but the number of upside surprises may start to level off, and investor enthusiasm toward potential new policies from Washington could wane as political realities set in. International growth appears stable, but acceleration doesn't seem to be on the horizon, while trade tensions pose a risk to global economies and markets.
International reports to look out for include: Australia; consumer confidence and employment change. China; lending statistics, CPI and PPI. India; trade balance, CPI and PPI. Japan; 4Q GDP and industrial production. Eurozone; 4Q GDP, trade balance and ECB policy meeting minutes. UK; CPI, employment change and retail sales.